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Houston, TX

Apartment

The Houston apartment market vacancy rate, which reached a cyclical floor of 5.2% in the third quarter of 2015, rose more or less steadily thereafter. It had reached 7.1% by mid-year 2017, the highest rate recorded by Reis for this market since 2012 and a source of growing concern among local observers. With absorption rising during the third quarter, the rate held steady at 7.1%. At $1,014 and $947 per month, asking and effective averages for the third quarter were up 2.8% and 2.5% year-to-date. Gains for the quarter alone were 1.2% and 1.1%.
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The Houston apartment market vacancy rate, which reached a cyclical floor of 5.2% in the third quarter of 2015, rose more or less steadily thereafter. It had reached 7.1% by mid-year 2017, the highest rate recorded by Reis for this market since 2012 and a source of growing concern among local observers. With absorption rising during the third quarter, the rate held steady at 7.1%. At $1,014 and $947 per month, asking and effective averages for the third quarter were up 2.8% and 2.5% year-to-date. Gains for the quarter alone were 1.2% and 1.1%.
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Industrial

Modest excesses of new supply over demand in 2015 and 2016 resulted in minimal increases in Houston’s low warehouse/distribution market vacancy rate. That trend, meanwhile, has been reversed in 2017. Vacancy, after rising by only 40 basis points over the two-year 2015-2016 span, shed 50 year-to-date in 2017. The rate closed the third quarter at 8.3%, down 50 points as well for the third quarter alone, when net absorption was particularly strong. Strong absorption in October resulted in a 30-basis-points decline to 8.0%. Rent growth in the warehouse/distribution sector, strong for a couple of years, slowed in 2015 but held steady in 2016—and is increasing again this year. At $5.27 psf and $4.98 psf, mean asking and effective rates in the third quarter of 2017 were up 2.0% each year-to-date after gains of 2.6% and 2.7% through 2016. Gains for the third quarter alone were 0.8% for both rates. October saw a 0.2% gain in the warehouse/distribution asking and effective rents. The vacancy rate in the Houston Flex/R&D market, however, has been running the other way. The rate closed the third quarter at 8.5%, down 30 basis points for the period but up 30 year-to-date following an increase by 20 basis points overall through 2016. The rate was unchanged in October. At $7.52 psf and $6.80 psf, respective averages for the quarter for this property segment represented increases of 1.8% asking and 1.7% effective year-to-date after gains of 1.9% and 2.1% through 2016. Gains in the third quarter of 2017 were 0.7% for both averages. October saw increases of 0.1% asking and effective.
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Modest excesses of new supply over demand in 2015 and 2016 resulted in minimal increases in Houston’s low warehouse/distribution market vacancy rate. That trend, meanwhile, has been reversed in 2017. Vacancy, after rising by only 40 basis points over the two-year 2015-2016 span, shed 50 year-to-date in 2017. The rate closed the third quarter at 8.3%, down 50 points as well for the third quarter alone, when net absorption was particularly strong. Strong absorption in October resulted in a 30-basis-points decline to 8.0%. Rent growth in the warehouse/distribution sector, strong for a couple of years, slowed in 2015 but held steady in 2016—and is increasing again this year. At $5.27 psf and $4.98 psf, mean asking and effective rates in the third quarter of 2017 were up 2.0% each year-to-date after gains of 2.6% and 2.7% through 2016. Gains for the third quarter alone were 0.8% for both rates. October saw a 0.2% gain in the warehouse/distribution asking and effective rents. The vacancy rate in the Houston Flex/R&D market, however, has been running the other way. The rate closed the third quarter at 8.5%, down 30 basis points for the period but up 30 year-to-date following an increase by 20 basis points overall through 2016. The rate was unchanged in October. At $7.52 psf and $6.80 psf, respective averages for the quarter for this property segment represented increases of 1.8% asking and 1.7% effective year-to-date after gains of 1.9% and 2.1% through 2016. Gains in the third quarter of 2017 were 0.7% for both averages. October saw increases of 0.1% asking and effective.
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Office

The first three quarters of 2017 saw the Houston area general purpose, multi-tenant office market vacancy rate add 30 basis points to close the third quarter at 19.5% (down 10 points since mid-year). By October, vacancy declined another 10 points. At $28.31 psf and $23.74 psf, asking and effective averages for the third quarter were up just 0.6% each year-to-date. Gains of 0.1% and 0.2% are reported for the third quarter alone. Through October, rents were up a penny each.
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The first three quarters of 2017 saw the Houston area general purpose, multi-tenant office market vacancy rate add 30 basis points to close the third quarter at 19.5% (down 10 points since mid-year). By October, vacancy declined another 10 points. At $28.31 psf and $23.74 psf, asking and effective averages for the third quarter were up just 0.6% each year-to-date. Gains of 0.1% and 0.2% are reported for the third quarter alone. Through October, rents were up a penny each.
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Retail

Demand for Houston’s community-neighborhood shopping center space has run ahead of same-year new supply in most years since 2010. With a relatively huge volume of new product completing construction in 2016, however, supply surged ahead. But demand was strong all the same—and the difference was not great enough to produce large increases in the vacancy rate. The rate closed the year at 11.0%, up just 10 basis points from a year earlier. The same 11.0% vacancy is recorded as well for the third quarter of 2017. A 10-basis-points increase that followed in October, an effect of modest negative net absorption that month, was itself a likely effect of the temporary slowdown in leasing in the wake of the storm. At $18.53 psf and $16.01 psf, asking and effective averages in the third quarter of 2017 were up 1.6% and 1.7% year-to-date following last year’s increases of 3.0% and 3.1%. Gains for the third quarter of 2017 alone were just 0.3% for both rates.
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Demand for Houston’s community-neighborhood shopping center space has run ahead of same-year new supply in most years since 2010. With a relatively huge volume of new product completing construction in 2016, however, supply surged ahead. But demand was strong all the same—and the difference was not great enough to produce large increases in the vacancy rate. The rate closed the year at 11.0%, up just 10 basis points from a year earlier. The same 11.0% vacancy is recorded as well for the third quarter of 2017. A 10-basis-points increase that followed in October, an effect of modest negative net absorption that month, was itself a likely effect of the temporary slowdown in leasing in the wake of the storm. At $18.53 psf and $16.01 psf, asking and effective averages in the third quarter of 2017 were up 1.6% and 1.7% year-to-date following last year’s increases of 3.0% and 3.1%. Gains for the third quarter of 2017 alone were just 0.3% for both rates.
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